Why Are We Paying for China's Navy?

In June 2015, President Trump said, “I will build a great, great wall on our southern border. And I will have Mexico pay for that wall.”

From 2005 to 2022, the Chinese Navy has grown from 216 ships to 351 ships. In 2022, the U.S. Navy 294 ships.

Our Navy is still better in part because we have 11 aircraft carriers, and they only have two operational aircraft carriers.

China wouldn’t have such a formidable navy without American investors unwittingly helping them. I have argued in previous columns that we should delist Chinese companies from our capital markets.

In January 2023, there were 252 Chinese companies listed on the New York Stock Exchange, NASDAQ, and NYSE American with a total market capitalization of $1.03 trillion.

According to former Reagan adviser Roger Robinson, we need to delist Chinese companies from our capital markets, crack down on 4,000 Chinese companies that receive passive investment products, such as mutual funds, and Americans should also be prohibited from investing in any Chinese companies that are not compliant with our laws.

In 2023, Robinson wrote:

“China’s economic growth model of infrastructure investment and a massive accumulation of debt to stimulate demand has largely run out of gas and cannot be offset by relatively anemic consumer spending as a percent of GNP (some 50% versus more than 70% for most G-7 countries).”

Since 1949, China’s communist leaders have made it clear on multiple occasions that they want reunification. If China cannot take Taiwan through diplomatic means, they will eventually resort to military force unless they are properly deterred.

The Chinese government will wait until they believe they can reasonably conquer Taiwan with an acceptable loss of manpower, equipment and economic costs.

In October 1975, Mao Zedong told Secretary of State Henry Kissinger that China could wait 100 years for Taiwan.

In 2019, President Xi said: “The long-standing political differences between the two sides are the root cause that affects the steady growth of cross-Strait relations, but we should not allow this problem to be passed down from one generation to the next.”

This does not mean that Xi Jingping will succeed in taking Taiwan. Despite China’s growing military and economic strength over the past few decades, the costs of such an invasion far outweigh the benefits.

In “The Art of War,” Sun Tzu wrote, “He will win who knows when to fight and when not to fight.” Taiwan’s dominance in semiconductors may have given them a way to deter the Chinese indefinitely.

According to The Economist, “Taiwan produces over 60% of the world’s semiconductors and over 90% of the most advanced ones.”

In 2023, Taiwan’s TSMC and South Korea’s Samsung are leading the world in producing semiconductors that are 3 nanometers. In 2020, only 6% of China’s semiconductors were domestically produced.

Beyond its dependence on semiconductors, China has been a food importer since 2004.

In 2000, China’s food output was 93.6% of domestic demand. In 2020, it was only 65.8%.

China’s dependence on food, oil, and semiconductors from abroad makes an invasion of Taiwan completely irrational. Dictators can miscalculate, but Xi must know that China cannot manage its real estate crisis, its debt, and a war with Taiwan at the same time.

In 2023, China’s combined government, household, financial, and corporate debt was 280% of its GDP.

In 2017, China surpassed the United States as the world’s largest oil importer. That year, China imported 8.4 million barrels per day.

By 2022, China averaged 10.2 million barrels per day. In the first half of 2023, China imported 11.4 million barrels per day.

For all of China’s problems, President Xi wants Taiwan. The Taiwanese don’t want to live under a dictatorship again.

From 1949 to 1987, Taiwan was under martial law. Taiwan was a one-party dictatorship dominated by Chiang Kai-shek and about 1.2 million mainlanders who fled China after the communists took power.

The first three presidents of Taiwan were Chiang Kai-shek (1950-1975), Yen Chia-kan (1975-1978), and Chiang Kai Chek’s son Chiang Ching-Kuo (1978-1988).

In 1988, Lee Teng-Hui became the first president who was born in Taiwan. Through Lee’s democratic reforms, he was directly elected by the people of Taiwan in 1996.

Once Taiwan became a democracy, the native Taiwanese outnumbered the mainlanders. In 1999, Taiwan had 18 million native Taiwanese out of total population of 21.5 million people (23 million today).

Most Taiwanese want to maintain the status quo. Even Taiwan’s most pro-independence politicians such as former President Chen Shui-bian, and current President Tsai Ing-wen, are not willing to declare independence if China does not use force.

The problem is that China will not wait forever.

If American investors stop paying for China’s military, the United States can deter China from invading Taiwan.